- Company says it has support from holders of 44 percent of debt
- Canadian miner seeks to push out maturities starting in 2018
Sherritt International Corp. Chief Executive Officer David Pathe said he is "quite confident" the company’s proposal to extend maturities on its debt will be approved by bondholders in a vote.
The Toronto-based miner announced Tuesday it had reached an agreement with holders of about 44 percent of its C$720 million ($550.8 million) in outstanding senior unsecured debt. The company seeks to push the due date on its C$220 million of 8 percent notes maturing in 2018 to 2021, its C$250 million of 7.5 percent bonds to 2023 from 2020, and to 2025 from 2022 on its C$250 million of 7.875 percent notes.
Sherritt needs support from two-thirds of bondholders voting, Pathe said in a phone interview. The company anticipates a meeting with the creditors be held in early to mid-July, he said.
"The vast majority of the bond holders we spoke to were supportive of the transaction, I think generally recognizing that we’ve got long-life, low-cost assets that should be capable of serving the debt," he said. "I’m quite pleased with the level of support we’ve received from the bondholders we spoke to."
The nickel-miner, which has had operations in Cuba for more than two decades and is the largest independent energy producer in the country, has worked to shore up its liquidity as the price of nickel has failed to recover alongside other commodities.
Pathe said the company wasn’t considering asset sales at this time. The company had C$370 million in cash at the end of the first quarter, he said.
"We’ve got a strong liquidity position that gives us plenty of financial capacity to get through even a continuing low commodity price environment for some period of time here," he said.
Sherritt explored alternatives to improving its capital structure and concluded that extending the maturities was the best option to maximize and preserve value for the company and its stakeholders, according to the statement.
"We believe the extension, if fully executed, would provide some breathing room for Sherritt, and view the announcement as a positive for the shares," RBC Capital Markets analysts led by Fraser Phillips wrote in a research note published Tuesday.
Sherritt’s shares climbed as much as 6.9 percent, the most in two weeks, and were up 5.6 percent to 76 Canadian cents at 3:17 p.m. in Toronto trading on Tuesday. The stock is up 4.1 percent in 2016, rebounding after losing 87 percent in the past three years.
The company’s 2018 bond is currently trading around 50 cents on the dollar up from 46.4 cents in March, according to Bloomberg data.
The company has entered into confidential agreements with certain institutional holders of the bonds, the statement said. About 90 percent of the bondholders consulted by Sherritt have entered into the support agreement, the company said.
Bondholders who vote in favor of the extension on or prior to a deadline to be established will receive cash equal to 2 percent of the principal amount of notes held or 73.25 warrants for each C$1,000 of principal amount of notes, the company said.